How to price your product on Amazon: Tips & tricks

Amazon has loads of tricks and tools you can use to gain an advantage over your competition. You’ve got multiple types of advertising tools, different bidding strategies, and lots of options for how to lay out your page. But how do you determine perhaps the most important thing about your product? 

Often, price is the single most determinative factor in a shopper’s choice of what to buy. You’d better make sure you get it right, otherwise you could see competitors taking your business by undercutting you, or you could leave money on the table.

The majority of sales on Amazon happen through search, and most of those happen on the first page. Competition is intense before shoppers even get onto your page. Since products are all listed on top of each other on a results page, there is nowhere to hide from potentially better deals offered by your rivals.

This means you can’t get away with prices that are too expensive. At the same time, you can’t lower your price too much. In short, strategic pricing that balances competitiveness with profitability yields better long-term results than simply offering the lowest price is what you need. 

Understanding Amazon’s pricing ecosystem

As a seller on Amazon, you’re responsible for setting your own prices. These prices must align with Amazon’s policies, customer trust principles, and competitive dynamics. Amazon’s mission to be “Earth’s most customer-centric company” means product pricing is continuously monitored for fairness, competitiveness, and alignment with customer expectations.

How Amazon’s algorithm factors in pricing

Amazon uses algorithms to evaluate seller offers based on multiple dimensions: total price (item + shipping), competitiveness relative to offers on and off Amazon, historical pricing trends (e.g., 60-day average, recent sales prices, MSRP), and fulfillment speed and method.

Pricing that is significantly higher than recent internal or external prices can trigger penalties such as offer removal, Buy Box suppression, or account suspension in severe cases. Amazon’s pricing algorithm prioritizes offers that create “value and trust” for customers, not just low prices.

The algorithm is constantly scanning not only other Amazon listings but also major external retailers like Walmart, Target, and Best Buy. This means your pricing strategy must account for the broader competitive landscape beyond Amazon.

Buy Box eligibility and pricing impact

The Featured Offer (Buy Box) is where most purchases occur. Eligibility depends on competitive pricing, fast and reliable shipping (FBA preferred), strong account health metrics (e.g., Order Defect Rate, Cancellation Rate), and adequate inventory levels.

Pricing too high compared to other Amazon listings or external retailer prices can immediately disqualify a seller from Buy Box visibility. Amazon provides a Pricing Health Dashboard to show inactive listings due to pricing errors, offers not eligible for Buy Box, and competitive insights with recommendations.

Customer price expectations on Amazon

Today’s Amazon customers expect low and transparent prices, no excessive shipping fees, and visible savings via promotions, strike-through pricing, or coupons. Reference prices (List Price, Was Price) help shoppers perceive value, though misleading or outdated reference prices are penalized.

Shoppers increasingly use Price Per Unit (PPU) data to make buying decisions, especially for consumables. Amazon suppresses listings that do not include proper unit count data or display inconsistent or deceptive pricing.

Trust and clarity are central. Amazon may remove or hide offers that don’t align with these expectations. The platform is increasingly strict about pricing practices that could confuse or mislead shoppers.

Price and its relationship to visibility and conversion

Visibility is largely driven by eligibility for the Buy Box, competitive pricing aligned with market norms, promotions and deals (e.g., Lightning Deals, coupons), and search algorithms that surface offers based on value metrics.

Conversion rates improve when pricing is within 5% of the Featured Offer price, aligns with recent historical pricing trends, and includes clear discount structures or PPU for comparison. Listings priced outside acceptable thresholds may lose Buy Box eligibility, get deactivated for potential pricing errors, or receive lower search visibility.

Pricing that matches customer expectations and Amazon’s benchmarks not only boosts conversion but also protects long-term seller performance. According to Amazon’s seller forums, offers within 5% of the lowest comparable price tend to see significantly higher conversion rates.

How to determine a good price

Amazon encourages sellers to balance competitive pricing with profit margins. You have to understand that simply undercutting competitors may win short-term sales but hurt long-term sustainability. 

A “good price” maximizes chances of winning the Buy Box, complies with Amazon’s Fair Pricing Policy, appeals to customers’ perception of value, and protects your brand and margin.

To know what you want to charge, a good place to start is with your profit margin. Your product will cost a certain amount to produce, and obviously, you want to charge more than that number. After also accounting for associated costs such as PPC costs, FBA fees, etc., but how much more?

Typically, a solid profit margin lands somewhere between 25-30%, but this number can vary wildly depending on the product and other factors. Some product lines survive on a 10% margin, while others enjoy 50%. 

Here are some ways to price an item to give you an idea:

1. Cost-based pricing

Your minimum price will almost certainly be your break-even price, under which you couldn’t cover your costs and start losing money. Unless you’re just launching a product and employing some form of aggressive below-cost strategy to achieve market penetration before bringing prices back up (a strategy that carries its own risks), then breaking even shouldn’t even be considered.

Sellers should account for product sourcing cost, Amazon referral fees and fulfillment fees (e.g., FBA), and overhead, marketing, and packaging costs. Use the Amazon Revenue Calculator to calculate break-even and profitable prices depending on fulfillment method (FBA vs FBM).

2. Competitor-based pricing

This strategy is based on the pricing of your competitors’ products. Going this route, you won’t want to let your rivals undercut you, especially if their products are of similar quality.

When you initially launch a product, do some research to determine the average price range of similar products to yours and keep the price at the lower end of that range, at least until your product begins to gather good reviews. At that point, you will have more flexibility to raise the price and still have shoppers see it as a justified choice.

Monitor Amazon internal competition (Featured Offer prices) and external prices from major online retailers (Amazon monitors these too). Set total price (product + shipping) equal to or below the Competitive External Price to avoid Buy Box suppression. Consider the fulfillment method and condition to compare apples-to-apples pricing.

3. Value-based pricing

As mentioned earlier, price may be the most important metric, but it is far from the only one. You can differentiate yourself with the quality, function, and lifestyle elements of your product. You can evaluate your product relative to your competitor and charge a premium for a better offering.

You will need to justify this, so make sure your product description and accompanying content are at a high level. Remember that there is a fine line between what is considered worthwhile and what is considered extortionate, and you don’t have a blank check. In the end, the name of the game is to create value, meaning you offer a good quality product at a reasonable price.

Reflect perceived value, brand strength, and unique selling points (USP). Use tools like A/B testing to discover price elasticity. Combine with customer reviews, packaging, and Prime shipping to justify a higher value proposition.

4. Dynamic pricing strategies

Dynamic pricing is the practice of automatically adjusting prices based on real-time market conditions, including competitor pricing, demand surges (e.g., holidays, Prime Day), stock levels, and historical performance. Amazon supports this through its Automate Pricing tool or you can opt for a third-party solution.

Each app’s workflow is different, but generally sellers define minimum and maximum price thresholds and pricing rules that can react to changes in Buy Box price, Competitive External Prices, and inventory levels. Additional dynamic pricing types include sales-based pricing (price drops after X units sold), time-based discounts (promotions that expire after a period), and behavior-triggered pricing.

Amazon warns that prices too low (below set minimum) or too high (above competitive or historical) may trigger suppression or loss of visibility. Dynamic pricing helps you stay competitive without constantly monitoring the market manually.

Psychological pricing tactics that drive conversions

Charm pricing

The classic $19.99 vs $20.00 pricing effect is still relevant today, especially in competitive categories. Charm pricing is often interpreted by customers as a better deal, a smarter purchase, and more psychological value.

On Amazon, “.99” pricing appears across search, product pages, and deal listings—making it more persuasive due to visual repetition. It works well with lightweight, commodity, or frequently purchased items. Combine with coupons to enhance the perception of a deal (e.g., “$19.99 + $2 off coupon”).

This pricing tactic is an age-old way marketers have harnessed consumer psychology. The beauty of it is that even if the shopper knows what is happening and that the difference is negligible, it still works! It will work in a store, and it works on Amazon.

Price anchoring techniques

Price anchoring refers to showing a higher reference price (List Price or “Was Price”) before the actual sale price. Amazon supports this through List Price (MSRP or the price at which substantial sales occurred) and Was Price (90-day median price excluding sales).

Ensure reference prices are realistic and current, or Amazon may not display them. Showing a discount (e.g., “List: $49.99, Price: $29.99”) boosts perceived value. This tactic is particularly effective during sales events and product launches.

Amazon has specific requirements for reference prices: List Prices must be the MSRP or a price at which you’ve made substantial sales in the recent past. Was Prices must reflect your 90-day median price excluding sales. Misusing these can result in listing suppression.

Bundle pricing strategies

Bundle pricing involves selling multiple items together at a discounted or combined price to increase average order value (AOV), help move slow-moving SKUs, and create perceived savings. Amazon allows bundling if products are complementary (e.g., toothbrush + toothpaste) and not misleading.

To maximize effectiveness, show PPU (Price Per Unit) to help users see savings, add reference prices for each bundled item if allowed, and highlight bundle savings in bullets or title (e.g., “Save 15% with this 3-pack”).

Bundle pricing is particularly effective for consumables, related accessories, or products commonly purchased together. It’s a powerful way to differentiate your offer from competitors selling single items.

Premium positioning through pricing

Pricing high can create a perception of luxury, exclusivity, or quality, especially in niches like beauty, health & wellness, and home decor. Best practices for premium positioning include reinforcing value through branding, A+ content, packaging, and customer reviews.

Avoid undercutting your own premium branding with discounts that seem “cheap.” Use Amazon’s Business Pricing Rules to offer exclusive B2B discounts without lowering consumer-facing prices. Consider leveraging FBA + Prime shipping to add trust and legitimacy to high-ticket items.

Premium positioning works when your entire listing communicates quality—from professional photography to polished copy to enhanced content options like A+ or Brand Store pages. The price alone won’t create a premium perception without supporting elements.

Pricing tools and automation on Amazon

Using Amazon’s pricing tools

Like we mentioned above, Amazon provides built-in tools to help sellers price competitively and efficiently: Automate Pricing automatically adjusts prices based on set rules and competitive triggers. The Pricing Health Dashboard highlights inactive listings due to pricing errors, offers not eligible for Buy Box, and listings close to Featured Offer thresholds.

Match Low Price is a one-click tool to match your listing’s price to the lowest offer (internal or external), based on condition and fulfillment method. Business Pricing Rules allow B2B sellers to create automated business-only pricing adjustments tied to retail prices.

These tools help you stay Buy Box eligible, react quickly to competitor price changes, protect from pricing suppression due to policy violations, and minimize manual intervention and errors.

SmartRepricer as a solution

SmartRepricer is a third-party repricing tool used by sellers to automatically adjust prices based on real-time competition, customize repricing strategies by SKU, condition, fulfillment, and seller type, set intelligent floor (min) and ceiling (max) prices, and avoid common issues like price suppression, Buy Box loss, or undercutting.

This tool is useful for sellers with large catalogs, multi-channel presence, and a desire for more nuanced pricing strategies than Amazon’s built-in tools allow. SmartRepricer gives you greater control over your pricing strategy while still automating the tedious work of monitoring and adjusting prices.

SmartRepricer also works across 22 Amazon marketplaces, giving you global pricing control from a single dashboard. It allows for sophisticated rule creation that accounts for seasonality, inventory levels, and competitive positioning.

Extra tips for Amazon pricing

Even outside the context of product quality, there are situations where it seems better to charge more. 

Consider, for example, if you are trying to sell to non-Prime members who don’t have free shipping on all orders. If they see that they have to spend an extra $7 on top of the stated sales price just to receive the item, or if they have to add some other item to their order that may well exceed that $7, they are psychologically less likely to want to follow through with the purchase.

It may actually be beneficial to price the product above that free shipment price to begin with. They would be more likely to convert if they just have to pay what is on the label, if it says “free shipping,” even if competitors may have cheaper products that would require postage fees.

A/B testing

A great way to determine your price point is to carry out some A/B testing. You can do it simultaneously over a certain period of time—ideally at least two weeks—or you can try a couple of weeks at one price point, followed by another couple of weeks at another, and see which one performed better.

Amazon encourages price testing using manual adjustments, listing copies with varied prices (when allowed), and promotional cycles (test with/without coupons or Lightning Deals). Monitor performance over set time periods (ideally 7-14 days per test condition) to gather meaningful data before making decisions.

When A/B testing, look beyond just sales volume to metrics like total profit, inventory turnover rate, and customer feedback. Sometimes, a higher price with slightly fewer sales can yield better overall results.

Seasonal pricing strategies

Increase prices when demand is high and competition is tight, such as during Q4, Prime Day, Back to School, etc. Use discounts or bundles to clear inventory post-season and incentivize repeat purchases. Schedule Lightning Deals, coupons, and Best Deals around key retail events.

Amazon provides specific promotional tools that align with major shopping events. Plan your pricing calendar around these opportunities to maximize visibility during high-traffic periods.

Be strategic about when you raise and lower prices. Price increases often make sense before high-demand periods, while strategic discounts can help move inventory during slower seasons.

Non-Prime vs. Prime pricing considerations

Prime customers expect fast, free shipping and competitive pricing. If not using FBA or SFP, your listing may appear less favorable (lower visibility and trust). Consider pricing slightly lower for non-Prime offers to account for perceived shipping inconvenience.

FBA listings can command a higher price point due to fast delivery, Prime eligibility, and higher trust and conversion rates. Amazon favors FBA or Prime-eligible listings in Buy Box rotation, search ranking, and deal visibility.

The fulfillment method you choose directly impacts your pricing strategy. FBA items often command a premium because of the Prime badge and customer confidence in Amazon’s fulfillment. Merchant-fulfilled items may need more competitive pricing to overcome the lack of Prime benefits.

New product launch pricing

When launching a new product with no reviews, use introductory pricing (lower price to drive conversions and review collection) and coupons or Lightning Deals to increase visibility and sales velocity. Once reviews and rankings build up, gradually raise the price to hit your profit targets.

Consider A/B testing different launch prices over a 30-day cycle to find the sweet spot. Launch pricing is an investment in future success. The reviews and sales history you build during your launch period will pay dividends later when you can command higher prices with established credibility.

Many successful sellers start with prices 15-25% below their long-term target during the initial launch phase. This helps overcome the hurdle of having few or no reviews while establishing sales history and organic ranking.

Common pricing mistakes to avoid

Race-to-the-bottom pricing wars

Overly aggressive price cuts may trigger Buy Box eligibility loss if below minimum thresholds, start a price war that erodes margin for everyone, and undermine long-term brand perception. The solution is to use repricing tools with floor limits and focus on value-added differentiators (e.g., Prime, reviews, bundles).

Amazon’s algorithms can actually flag prices that are suspiciously low, potentially triggering listing suppression or account health alerts. Set minimum price floors that ensure profitability and comply with Amazon’s policies.

Once a price war begins, it can be difficult to reverse. Competitors follow each other downward, conditioning customers to expect unsustainably low prices. This damages the entire product category in the long run.

Ignoring marketplace fees when setting prices

Amazon charges referral fees (usually 8-15%), FBA fees (based on size, weight, and category), and storage fees (monthly and long-term storage). Many sellers underprice by failing to include these in the cost analysis. Use the Amazon Revenue Calculator to ensure prices yield a profit after all fees.

FBA fees in particular can vary significantly based on product dimensions and weight. Even small changes in packaging can move a product into a different fee tier, dramatically affecting profitability.

Remember that Amazon’s fee structure changes periodically. What was profitable last year might be marginal today due to fee increases. Regularly review your cost structure and adjust pricing accordingly.

Neglecting to adjust prices based on performance

Failing to change pricing when inventory is piling up, a product consistently loses the Buy Box, or seasonality shifts demand, leads to stagnant sales and increased holding costs. Use automated repricing or set triggers to adjust prices based on sales velocity, time in storage, and page views vs. conversions.

Inventory age is a critical factor in pricing decisions. Products approaching long-term storage fee thresholds may warrant more aggressive discounting to avoid these costly penalties.

Monitor the relationship between page views and conversion rates. If you’re getting traffic but few sales, your price may be the barrier. Temporary discounts can help determine if price is the issue.

Failing to consider the complete competitive landscape

Don’t just watch Amazon. Amazon watches external prices too from Target, Walmart, eBay, and other major retailers. If your total price (product + shipping) is higher than external retailers, Amazon may suppress your Buy Box eligibility or deactivate the listing under the Marketplace Fair Pricing Policy.

The solution is to use tools or services to track external pricing trends, not just Amazon prices. Amazon’s pricing algorithms consider the “Competitive External Price”—the lowest price available from major retailers—when determining Buy Box eligibility.

Cross-channel price parity is increasingly important. If you sell on multiple platforms, inconsistent pricing can trigger Amazon’s pricing alerts and affect your listing visibility.

Price smarter, not harder

Setting the right price for your Amazon products requires balancing strategy with data. Fortunately, there are tools that can help you find that sweet spot where your pricing maximizes profits while still remaining competitive enough to win the Buy Box and drive conversions.

Remember, like we said multiple times in this article, the lowest price isn’t always the winner. Value-based pricing, psychological tactics, and strategic positioning often outperform simple undercutting. What matters is implementing a strategic approach that balances profitability with competitiveness while understanding Amazon-specific pricing factors.

Ready to take the guesswork out of your pricing strategy? SmartRepricer from Seller 365 automates your pricing to keep you competitive 24/7. 

It intelligently adjusts your prices based on real-time market conditions while protecting your profit margins with customizable rules and boundaries. Plus, since it’s part of the Seller 365 bundle, you get it alongside 9 other seller apps to help you in other areas of your business.

Try Seller 365 today and transform your Amazon pricing and operations from a time-consuming hassle into a competitive advantage. Your profitability depends on it.